Definition
Churn Rate
Churn rate is the percentage of customers (or revenue) lost over a period, calculated as customers lost divided by customers at the start of the period. It is the inverse of retention and the single most-watched health metric for subscription businesses, because small monthly losses compound into large annual ones.
Key takeaways
- Churn rate is customers (or revenue) lost over a period divided by the count at the period's start — the inverse of retention.
- Logo churn (accounts lost) and revenue churn (dollars lost) can diverge sharply; always track and segment both.
- Net revenue churn goes negative when expansion outpaces losses — a frozen customer base that still grows revenue.
- Churn compounds: 5% monthly churn leaves under 55% of a cohort after one year, which is why retention usually beats acquisition.
Churn comes in two flavors that should never be conflated. Customer churn (logo churn) counts accounts that leave; revenue churn counts the dollars they take with them. The two diverge sharply when your smallest accounts leave most often — you can lose many logos while barely denting revenue, or lose one whale and gut your books. Track both, and segment them by plan, cohort, and tenure.
Gross revenue churn measures only lost revenue and can never be negative. Net revenue churn subtracts expansion (upgrades, seats added, usage growth) from contraction and cancellation; when expansion outpaces losses, net churn goes negative — the holy grail, where a frozen customer base still grows revenue. Reporting one without the other hides whether growth is leaky or compounding.
Because churn compounds, the math is unforgiving: 5% monthly churn leaves you with under 55% of a cohort after a year. This is why reducing churn is usually higher-leverage than acquiring new customers, and why churn feeds directly into lifetime value and the unit economics that decide whether a business is viable.
Planoda instruments churn from real product events rather than self-reported surveys, so retention and revenue-churn trends surface on the same dashboards as completion velocity.
Related terms
- Retention RateRetention rate is the percentage of customers (or users) who remain active over a period — the mirror image of churn. Calculated as customers retained divided by customers at the period's start, it measures whether a product delivers durable, repeated value rather than a one-time hit, and underpins almost every other growth metric.
- Customer Lifetime Value (LTV)Customer Lifetime Value (LTV or CLV) is the total profit a business expects to earn from a customer across the entire relationship. A common estimate is average revenue per customer times gross margin, divided by churn rate. LTV quantifies what a customer is truly worth, setting the ceiling on what a business can sensibly spend to acquire and keep them.
- Cohort AnalysisCohort analysis groups users by a shared starting characteristic — most often their signup or first-purchase date — and tracks how each group behaves over time. By comparing cohorts side by side, it separates the effect of when someone joined from the effect of how long they have been around, revealing trends that blended averages hide.
- Annual Recurring Revenue (ARR)Annual Recurring Revenue (ARR) is the normalized, predictable subscription revenue a business expects over a year, counting only recurring contracts and excluding one-time fees. It is the headline scale metric for subscription companies — a snapshot of the run-rate revenue the customer base would generate over twelve months at the current moment.
- Customer Health ScoreA customer health score is a composite metric that blends behavioral and relationship signals — product usage, support history, engagement, sentiment, and payment status — into a single indicator of how likely an account is to renew, expand, or churn. It gives customer success teams an early, prioritized view of which accounts need attention.